"Digitalization" & Textile Products

Prepared by: Anton Schumann

GHERZI for Textile Consulting

It is not surprising that digitalization has been coined the ‘Fourth Industrial Revolution’. Many old and familiar business models are not fi t for purpose anymore and traditional industries are being faced with unprecedented challenges.

When considering digitalization in the textiles market, one factor particularly stands out: the customer. Digitalization has enabled the customer to rise in importance and he is now in possession of more power than ever before. This power comes in the form of knowledge and the customer is now able to inform himself about any product in the world at any given time and acquire a transparent view of price and product. He may need to invest a small amount of his time to achieve this. He is no longer satisfied with what is on offer at his local shop, however, he also expects a lot more from companies to whom he has entrusted his data when he shops online. Companies should use this data to appeal to customers in a more personalized way and use it to provide them with relevant information via different channels.

Increasing numbers of platforms are springing up with the aim of making information gathering easier for customers. These platforms bring all the relevant products into one place for a particular target group. In addition, all the key players in the market are banded together in one place. New and important marketplaces are emerging as has been demonstrated by the fact that the company LVMH has recently invested USD 60 million in the fashion platform Lyst.1

The Customer Is The New King

Today’s customer of textile products has a wide selection of products to choose from, however, he doesn’t have a great deal of time on his hands. He also wants to have a satisfying shopping experience if he has the choice. Most items are purchased quickly and most purchasing decisions are made quite quickly as the price is not particularly high.

However, the large selection of marketplaces and providers can also mean that the customer misses the personal service offered at the local boutique or gentlemen’s outfitter who know his size, which jackets and shirts are already hanging in his wardrobe and which items would match perfectly. The digital retailer needs to work hard to provide this type of value-added personal service.

In terms of demographics, the obsession with the youth market is now coming to an end. The new target groups are those above 50 who have large budgets to spend. The spotlight is also turning increasingly on the subject of sustainability even if consumers very quickly throw good intentions overboard if they have the chance to buy a stylish yet cheap t-shirt made in Bangladesh.

How to Engage with new Customers

• It is important to strike the words ‘standard’ and ‘mass market’ from your vocabulary! Your customers are individuals and wish to be treated as such. Use digital technology to appeal to this sense of individuality and connect with your customers via different channels and formats.
• Offer more than just individual products and instead offer stories for each niche. Use storytelling and your selling proposition in a flexible and variable way.
• Communicating with your customer should not end after each purchase is completed. After-sales is also pre-sales. The customer may buy even more items!
• ‘Be faster than real time!2 Product recommendations are good, predictive recommendations are better. Your story is more than the benefits of the product you are selling.
• The digital customer wants more than just a product. Stop simply selling clothing and accessories and instead aim to fulfil your customers’ needs and position yourself as a lifestyle coach.

*Amazon started off selling books and now offers a huge and successful marketplace for every imaginable product. The platform economy provides the textile industry with new opportunities to develop innovative business models which can be quickly tested in the marketplace. The digital industry also opens up access to the vast global consumer market via the internet. The textile sector should not exclude itself from these opportunities and risks.

FEATURES OF PLATFORM COMPANIES

• Transaction costs are costs that are incurred in the course of a business transaction. These costs include those that are incurred when looking for a suitable business partner, when initiating a transaction or from transport. Costs that are incurred in the digital business model are generally significantly lower than in traditional models. Reasons for this include greater transparency in the markets, the fact that decisions regarding the selection of a business partner are supported by reviews which are publicly available and/or standardized contracts make individual agreements unnecessary.

Examples of this model include eBay, Spock and Rebuy: instead of searching for your product at a flea market, many sellers are gathered together on one platform which is accessible at all times via the internet. Consumers can compare products and prices here and they can also view how customers have rated previous transactions with the sellers.

The textile retail sector is especially under a great deal of pressure due to digital business models such as BESTSECRET, ZALANDO and AMAZON because these platforms enable customers to select and purchase the most suitable products more quickly and more cheaply. Transaction costs when ordering from Amazon are much cheaper than going on a shopping trip in the center of Berlin.

• Digital platforms have the significant advantage of being available to their customers at all times. Consumers can access companies’ products and services 24 hours a day, 7 days a week.
• Coverage and product ranges are infinite and physical boundaries are not very relevant.
• In the context of digital business models, data is an essential component and a factor that should not be underestimated. Each user deposits a large amount of data which can be collected and evaluated. If these evaluations are read in a skillful way, different types of added value can be achieved depending on the business model.

*Travel agents are therefore replaced by travel platforms such as Opodo or Trivago and apps such as MyTaxi establish a direct connection between the traveler and the taxi.

EXAMPLES OF SUCCESSFUL PLATFORM BUSINESSES IN DIFFERENT INDUSTRIES

Well-known examples of digital platforms which target individual customers include Airbnb, Amazon, Uber, eBay and the app stores run by Apple and Google. Suppliers of products and services connect with potential customers on a digital platform. Platform operators can in turn charge the vendors, customers or both a fee for each transaction or charge them to access the platform. He does not need to produce goods himself or offer a service, he just needs to operate a digital marketplace.

EXAMPLES OF DIGITAL PLATFORMS FROM THE TEXTILE INDUSTRY

• MATCHESFASHION.COM, LONDON, UK

In just ten years, MATCHESFASHION.com has managed to become one of the most successful online retailers of luxury fashion. The average customer who visits MATCHESFASHION currently spends USD 4,000 and spends an average of 25 minutes on the platform. MATCHESFASHION made approx. €150 million via its digital platform in2017.

MATCHESFASHION is one of the most successful examples of the digital business model in the clothing industry. Business model development is currently continuing to evolve. In addition to established brands such as Gucci, Dior etc, MATCHESFASHION is including more and more small and exclusive designers from across the world in its portfolio. This enables the designers and the suppliers to circumvent the vagaries of the retail trade and to communicate directly with the end customer. MATCHESFASHION now delivers luxury clothing to customers in more than 67 countries.

The MATCHESFASHION system knows from its members which designers, colors, products, types of quality are viewed and followed the most and which ones have already been purchased. This information is combined with other user data so that the customer can be presented with offers that match his particular requirements. These ‘bite-sized’ pieces of information enable MATCHESFASHION to present products in a targeted way which results in sales.

• SPOONFLOWER AND ROOSTERY, USA

SPOONFLOWER and ROOSTERY are on-demand digital printing companies which print customized fabrics, wallpaper and gift wrap. The companies were founded in May 2008 by Stephen Fraser and Gart Davis who were both from Lulu.com

There were over one million people in the SPOONFLOWER and ROOSTERY community in 2013 who were using the companies’ fabrics to make curtains, bed coverings, clothes, bags, furniture, dolls, cushions, framed artwork, costumes, banners and much more. The SPOONFLOWER and ROOSTERY marketplace currently offer the largest collection of designs by independent fabric designers in the world.  

SPOONFLOWER and ROOSTERY deliver their products within 2-7 days by Fedex or UPS. The customer can place orders with SPOONFLOWER and ROOSTERY starting at a minimum quantity of one square meter SPOONFLOWER and ROOSTERY offer the customer something that has never been offered before in the textile industry: low order quantities and customized printing.  SPOONFLOWER and ROOSTERY operate and deliver across the world 24/7. Designers can use SPOONFLOWER and ROOSTERY to market their designs across the world and earn a percentage of the profit through selling their designs via the platform.